TIDMMAB1
RNS Number : 6798A
Mortgage Advice Bureau(Holdings)PLC
28 March 2017
MORTGAGE ADVICE BUREAU (HOLDINGS) PLC
28 March 2017
Final Results for the year ended 31 December 2016
Mortgage Advice Bureau (Holdings) PLC is pleased to announce its
final results for the year ended 31 December 2016.
This announcement contains inside information.
Financial highlights
-- Revenue up 23% to GBP92.8m (2015: GBP75.5m)
-- Gross margin broadly maintained at 23.9% (2015: 24.2%)
-- Profit before exceptional gain(1) and tax up 20% to GBP12.5m (2015: GBP10.4m)
-- Profit margin before exceptional gain(1) and tax of 13.5% (2015:13.8%)
-- Eighth consecutive year of strong revenue and profit growth
-- High operating profit to cash conversion(2) of 128% (2015: 112%)
-- EPS before exceptional gain(1) of 20.3p up 18% (2015: 17.2p)
-- Proposed final dividend of 10.5p making a total dividend
(excluding special dividends) of 18.3p, up 27%, for 2016 (payout
ratio of 90%)
-- Paid special dividends of 5.35p following the sale of stake
in Capital Private Finance Limited for GBP2.7m
-- Strong financial position with significant surplus on regulatory capital
-- Total cash balances of GBP18.7m (2015: GBP14.0m)
-- Unrestricted cash balances of GBP10.8m (2015: GBP8.2m)
Operational highlights
-- Adviser numbers up 20% to 950 at 31 December 2016 (2015:
790); with further growth since the year end of 26 to 976 at 24
March 2017
-- Average number of Advisers in 2016 up 23% to 888 (2015: 720)
-- Four strategic investments completed: Freedom 365, Vita, Clear and Australian joint venture
-- Demonstrating continued operational leverage: overheads ratio
reduced to 11.1% (2015: 11.6%)
2016 2015 Change
------------------------------------------------- -------- -------- ------
Revenue GBP92.8m GBP75.5m +23%
-------------------------------------------------- -------- -------- ------
Gross profit GBP22.1m GBP18.3m +21%
-------------------------------------------------- -------- -------- ------
Gross profit margin 23.9% 24.2%
-------------------------------------------------- -------- -------- ------
Profit before tax GBP15.2m GBP10.4m +46%
-------------------------------------------------- -------- -------- ------
Profit before exceptional gain(1) and tax GBP12.5m GBP10.4m +20%
-------------------------------------------------- -------- -------- ------
Profit margin before exceptional gain(1) and tax 13.5% 13.8%
-------------------------------------------------- -------- -------- ------
EPS before exceptional gain(1) 20.3p 17.2p +18%
-------------------------------------------------- -------- -------- ------
Basic EPS 25.6p 17.2p +49%
-------------------------------------------------- -------- -------- ------
Proposed final dividend per share 10.5p 9.5p +11%
-------------------------------------------------- -------- -------- ------
Proposed total dividends per share 18.3p 14.4p +27%
-------------------------------------------------- -------- -------- ------
Adjusted operating profit to cash conversion(2) 128% 112%
-------------------------------------------------- -------- -------- ------
(1) GBP2.7m profit on disposal of 49% stake in Capital Private
Finance Limited
(2) Cash flow from operating activities adjusted for non-trading
items including loans to Appointed Representative firms ("ARs"),
loans to associates and other non-trade receivables as a % of
operating profit. This is now calculated using cash flow before
income taxes paid as a fairer representation of cash conversion as
% of operating profit. Excluding increases in restricted cash
balances of GBP2.1m, cash conversion for the year ended 31 December
2016 would have been 111% (2015: 95%).
Peter Brodnicki, Chief Executive commented:
"I am delighted to report that MAB has yet again delivered an
excellent set of results, with our eighth consecutive year of
strong revenue and profit growth, despite the obvious headwinds in
2016. Revenue was up 23% to GBP92.8m with MAB's overall share of UK
new mortgage lending increasing by 14% to 4.1%.
"We continue to enjoy a strong financial position following the
four strategic investments we made in 2016, which are a key part of
our strategy to maintain year on year market share growth and
further strengthen MAB's overall market position."
Current Trading and Outlook
Adviser numbers have continued to grow since the year end with
the Group reporting 976 Advisers at 24 March 2017, and we remain
confident about our planned growth in adviser numbers in 2017 and
2018, both organically and from new ARs.
We believe continued specialisation, whether applied to lead
generation, customer acquisition, the advice process or the
expertise provided by the MAB team, will deliver better customer
outcomes and enhanced business performance. The technology-focused
businesses in which we have recently invested bring significant
additional expertise in protection, telephone sales, lead
generation and conveyancing. These investments extend our
distribution and will be a key factor in increasing income
opportunities for our AR partners, as we support them in adapting
their business models to consumers' changing requirements.
The Council of Mortgage Lenders ("CML") recently published
revised estimates for gross mortgage lending for 2016 and 2017 of
GBP246bn and GBP248bn respectively, as well as publishing its first
estimate for 2018 of GBP252bn. Regardless of the CML's prediction
that gross mortgage lending growth will be relatively flat in 2017
and 2018, we are confident that with our strategy driven by our
customer's future direction of travel, we can continue to grow our
market share year on year and deliver attractive returns to
investors.
For further information please contact:
Mortgage Advice Bureau (Holdings) plc +44 (0)1332 525007
Peter Brodnicki, Chief Executive Officer
David Preece, Chief Operating Officer
Lucy Tilley, Finance Director
Nominated Adviser and Joint Broker:
Zeus Capital +44 (0)20 3829 5000
Martin Green
Nicholas How
Pippa Underwood
Joint Broker:
Canaccord Genuity +44 (0)20 7523 8350
Andrew Buchanan
Kit Stephenson
Richard Andrews
Media Enquiries:
investorrelations@mab.org.uk
Analyst presentation
There will be an analyst presentation to discuss the results at
08:30am today at the offices of Canaccord Genuity Limited, 88 Wood
Street, London, EC2V 7QR.
Those analysts wishing to attend are asked to contact
investorrelations@mab.org.uk
Copies of this final results announcement are available at
investor.mortgageadvicebureau.com
Strategic report - Chief Executive's Review
Introduction
I am delighted to report that 2016 was our eighth consecutive
year of strong revenue and profit growth despite the uncertainty
that the EU referendum brought to the housing and mortgage markets
last summer. We continue to focus our strategy on growth through
specialisation, increasing our market share in all conditions and
delivering strong returns for our investors.
Market environment
Housing transaction volumes overall have been relatively flat
over the last three years, with a slight increase in mortgage
transaction volumes. Both are predicted to be flat as we look ahead
through 2017 and 2018 as the UK Government manages the exit of the
UK from the EU. Intermediary market share has continued to rise and
in the year ended 31 December 2016 reached 72% (excluding
Buy-To-Let, where intermediaries have a higher market share, and
product switches with the same lender).
Intermediaries previously had limited access to the product
switching market in which customers change products with their
existing lender. However, more lenders have started providing
intermediaries with full access to this market which is estimated
to be equal in size to the remortgage market which was c. GBP90bn
in 2016. The CML industry data excludes product switches with the
same lender.
In the most recent RICS housing forecast for 2017, house prices
in the UK are predicted to see an average increase of 3% over the
course of 2017 as the number of transactions stabilises.
Delivering on our strategy
Technology
MAB will always seek to be an early adopter of new and emerging
technologies which is fast becoming a major differentiator within
the intermediary sector. The strong position that MAB has built as
a result of its proprietary MIDAS Pro platform and its in-house
development team enables MAB to prioritise technology developments
and will enable it to roll out robo-advice style initiatives
throughout 2017/18.
As a result we expect MAB's distribution to be able to compete
at the highest level with new robo-advice led entrants, whilst
retaining the clear advantage of offering our customers the choice
of how they want to research, receive advice and transact. Ease,
speed and convenience are highly valued by customers and, by
delivering such a service, MAB will be in a strong position to
further grow its market share.
MAB also sees technology playing an ever increasing part in lead
generation through highly effective data management and customer
profiling, both of which are major areas of focus for the
business.
Brand and distribution
Digital, brand and specialisation are major focuses for MAB as
we continue to grow our market share and seek to attract potential
new customers earlier in the research and decision making process.
Within the next few years we expect to start to leverage our brand
to support direct to consumer lead generation.
Developments in digital complement our strategy of providing
consumers with a choice of how they want to research, receive
advice and transact, which is at the heart of the MAB proposition.
Telephone advice is likely to increase, complementing face to face
advice which remains highly valued by consumers, and will continue
to be supported by increasingly streamlined digital processes. MAB
Regional Network Partners and carefully positioned and
professionally branded mortgage shops further support this
strategy.
Strategic investments and joint ventures
MAB only invests in companies that support our market share
growth strategy and that are intended to deliver longer term
solutions and income streams for MAB and its partner firms and
advisers.
MAB's first strategic investment following IPO was in Sort Group
Limited(1) ("Sort") in December 2015. Four further strategic
investments have been made in 2016.
In March 2016, MAB acquired a 25% interest in Clear Mortgage
Solutions Limited ("Clear"), to establish a Regional Network
Partner in Scotland.
In June 2016, MAB acquired a 20% interest in protection
specialists Vita Financial Limited ("Vita"), further enhancing
MAB's protection service proposition. Having researched the market
for the best specialists in protection, Vita stood out as the ideal
partner for MAB. MAB is helping the business scale whilst
maintaining Vita's extremely high quality customer service and
performance levels. Although MAB advisers perform strongly overall
in terms of protection, MAB's partnership with Vita is helping the
Group deliver even higher levels and consistency of protection
advice across the Group, and we expect to see a positive impact on
adviser productivity over the next few years.
In September 2016, MAB acquired a 35% interest in Freedom 365
Mortgage Solutions Limited ("Freedom 365"), a newly formed entity,
which started trading in that month. Leveraging the Freedom group's
existing telephony expertise, Freedom 365 is building a highly
scalable data management and telephony model for national lead
sources, including on-line estate agency business partners, which
should further increase MAB's market share.
In considering opportunities for extending MAB's distribution
outside the UK, we saw many similarities between the UK and
Australian mortgage markets. In December 2016, MAB entered into a
new joint venture, MAB Broker Services Pty Ltd ("MAB Broker
Services"), with Mortgageport Management Pty Limited, a mortgage
manager and mortgage broker based in Sydney. MAB Broker Services
started trading in that month under the Mortgage Advice Bureau
brand. The joint venture will embrace many of the proven systems
and processes adopted by MAB in the UK, with centralised lead
generation, and telephone and regionally based advisers combining
to deliver a comprehensive service to the Australian public.
(1) The Group invested in Sort Limited on 10th December 2015, on
11 January 2016 a new holding company, Sort Group Limited, was put
in place.
Summary
Our market share strategy is clear and consistent and it is our
customer's future direction of travel that drives our strategic
priorities for 2017 and beyond. At MAB, specialisation is a major
driver of strategy, whether applied to lead generation, customer
acquisition, the advice process or the expertise provided by the
MAB team, as we believe this delivers better customer outcomes as
well as enhanced business performance.
Businesses in which we have recently invested bring significant
additional expertise in protection, telephone sales, lead
generation, and conveyancing with each being very much consumer and
technology-focused. These investments extend our distribution and
will be a key factor in delivering an exceptional customer
experience, whilst further increasing income opportunities for our
AR partners, as we support them in adapting their business models
to consumers' changing requirements. This, along with our
increasing investment in the MAB brand and additional key
appointments, will enable us to lead from the front and drive the
forthcoming changes in our industry.
Business Review of 2016
I am pleased to report strong growth in revenue of 23% to
GBP92.8m with profit before exceptional gain and tax rising by 20%
to GBP12.5m. MAB's gross mortgage lending increased by 28% to
GBP10.0bn in 2016, with MAB's overall share of UK new mortgage
lending increasing by 14% to 4.1%.
Sale of 49% stake in Capital Private Finance Limited ("CPF")
In August 2016 MAB announced that it had completed the sale of
its 49% stake in CPF for consideration in cash of GBP2.7m.
Following confirmation that the Substantial Shareholding Exemption
applied to the capital gain arising on MAB's sale of its stake in
CPF, so that no corporation tax was payable on the capital gain,
MAB has now distributed the post-tax profit on disposal of GBP2.7m
to shareholders in full by way of special dividends. MAB's exposure
to the London market reduced to c.6% in terms of revenue as a
result of the disposal.
Regulatory changes
On 21 March 2016 the EU Mortgage Credit Directive ("EU MCD")
came into effect. EU MCD applies to all first and second charge
brokers and lenders, who were all required to follow the same
regulatory regime from that date. MAB adapted its procedures to
ensure it is fully compliant with EU MCD.
Industry data and trends
Housing purchase transactions by volume in the UK for the whole
of 2016 were broadly flat compared with 2015, as demonstrated in
the graph below, with property inflation of 7.5% (1) being the
primary factor that accounted for the increase of 12% in UK
mortgage lending overall. The spike in March 2016 ahead of stamp
duty changes in April 2016 is evident from the graph below.
http://www.rns-pdf.londonstockexchange.com/rns/6798A_1-2017-3-27.pdf
(1) Land Registry House Price Index
The increases in gross mortgage lending are illustrated in the
graph below. UK gross mortgage lending in 2016 for home-owner
purchases and remortgages grew by 7% and 19% respectively. UK gross
mortgage lending in 2016 for BTL purchases reduced by 4% whereas UK
gross mortgage lending for BTL remortgages increased by 15%.
http://www.rns-pdf.londonstockexchange.com/rns/6798A_-2017-3-27.pdf
Approximately 72% of UK mortgage transactions (excluding
Buy-To-Let, where intermediaries have a higher market share, and
product switches with the same lender) were via an intermediary in
2016, up from less than 50% in 2012. MAB expects this intermediary
market share to remain broadly stable going forwards.
We measure the development, performance and position of our
business against a number of key indicators.
http://www.rns-pdf.londonstockexchange.com/rns/6798A_2-2017-3-27.pdf
Financial performance
Revenues
Revenues were up 23% to GBP92.8m (2015: GBP75.5m). A key driver
of revenue is the average number of Advisers in each financial
year. Our business model continues to attract forward thinking ARs
who are seeking to expand and grow their market share. Average
Adviser numbers increased by 23% to 888 (2015: 720) during the
period from a combination of the recruitment of new ARs and the
expansion of existing ARs.
The Group generates revenue from three core areas which can be
summarised as follows:
Income Source 2016 2015 Increase
--------------------------- ----- ----- ---------
GBPm GBPm
--------------------------- ----- ----- ---------
Mortgage procuration fees 39.4 31.0 27%
--------------------------- ----- ----- ---------
Protection and General
Insurance Commission 36.4 30.4 20%
--------------------------- ----- ----- ---------
Client Fees 15.6 12.8 22%
--------------------------- ----- ----- ---------
Other income 1.4 1.3 11%
--------------------------- ----- ----- ---------
Total 92.8 75.5 23%
--------------------------- ----- ----- ---------
MAB's revenue mix is as follows:
Income Source 2016 2015
--------------------------- ----- -----
Mortgage procuration fees 42% 41%
--------------------------- ----- -----
Protection and General
Insurance Commission 39% 40%
--------------------------- ----- -----
Client Fees 17% 17%
--------------------------- ----- -----
Other Income 2% 2%
--------------------------- ----- -----
Total 100% 100&
--------------------------- ----- -----
All income sources continued to grow strongly, although average
revenue per adviser was flat due to the impact of a lull in
activity in the housing and mortgage market driven by uncertainty
surrounding the EU referendum. The spike in BTL applications as a
result of the stamp duty changes in April 2016 and increased
remortgaging affected growth in protection revenue in H1 2016 owing
to lower penetration of protection products for BTL mortgages and
remortgages, but this has rebalanced for the year as a whole.
Gross profit margin
Gross profit margin was broadly maintained at 23.9% (2015:
24.2%). The Group receives a slightly reduced margin as our
existing ARs grow their revenue organically through increasing
their Advisers. During the year MAB continued to attract some
larger AR firms, which has driven strong growth in Adviser numbers
and revenue. These larger new ARs, however, typically join the
Group on lower than average margins due to their existing scale
which therefore impacts upon gross margin.
Going forward, we expect to see some further erosion of gross
profit margin due to the continued growth of our existing ARs and
the acquisition of new larger ARs.
Overheads
Following absorption of GBP0.4m of FSCS supplementary levies in
the year ended 31 December 2016 (which the FSCS announced following
the year end), overheads as a percentage of revenue were 11.1%
(2015: 11.6%). This reduction in overheads as a percentage of
revenue demonstrates the scalable nature of the cost base. Certain
costs, primarily those relating to compliance, which represent
approximately 40 per cent. of our cost base, are closely correlated
to the growth in the number of Advisers, due to the high standards
we demand and the requirement to maintain regulatory spans of
control. The remainder of MAB's costs typically rise at a slower
rate than revenue which will, in part, counter the expected erosion
of gross margin as the business continues to grow. Going forward,
we expect to see a further reduction in overheads as a proportion
of revenue.
Profit before exceptional gain and tax and margin thereon
Profit before exceptional gain and tax rose by 20% to GBP12.5m
(2015: GBP10.4m) with the margin thereon being 13.5% (2015: 13.8%).
Reported profit before tax, which includes the exceptional gain of
GBP2.7m arising on the disposal of MAB's 49% stake in Capital
Private Finance Limited, increased by 46% to GBP15.2m (2015:
GBP10.4m).
Net finance revenue
Net finance revenues of GBP0.07m (2015: GBP0.14m) reflect
continued low interest rates.
Taxation
The effective rate of tax increased to 18.4% (2015: 16.9%)
principally due to MAB's research and development claim for
development on MIDAS Pro during 2014 and 2015 both being credited
against the 2015 tax charge. Going forwards we would expect our
effective tax rate to be marginally below the prevailing UK
corporation tax rate subject to the tax credits for MAB's research
and development expenditure still being available in respect of our
continued development on MIDAS Pro.
Earnings per share and dividend
EPS before exceptional gain(1) rose by 18% to 20.3 pence
(2015:17.2 pence).
The Board is pleased to propose a final dividend for the year
ended 31 December 2016 of 10.5 pence per share (2015: 9.5 pence per
share), amounting to a cash cost of GBP5.3m. Following payment of
the dividend, the Group will continue to maintain significant
surplus regulatory reserves. This final dividend represents circa
90% of the Group's post-tax profits for H2 2016 and reflects our
ongoing intention to distribute excess capital. MAB requires circa
10% of its profit after tax to fund increased regulatory capital
and other capital expenditure.
The record date for the final dividend is 5 May 2017 and the
payment date is 31 May 2017. The ex-dividend date will be 4 May
2017.
Cash flow
The Group's operations produce positive cash flow with net cash
inflow from operating activities of GBP13.4m (2015: GBP11.0m).
Adjusted cash flow(2) from operating activities as a % of
operating profit
2016 128%
2015 112%
The Group's operations are capital light with its most
significant ongoing capital investment being in computer equipment.
Only GBP0.3m of capital expenditure was required during the year
(2015: GBP0.1m). Group policy is not to provide company cars, and
no significant capital expenditure is foreseen in the coming year.
All development work on MIDAS Pro is treated as revenue
expenditure.
The Group had no bank borrowings as at 31 December 2016 (2015:
GBPnil) with unrestricted bank balances of GBP10.8m (2015:
GBP8.2m).
The Group has a regulatory capital requirement amounting to 2.5%
of regulated revenue. At the end of 2016 this regulatory capital
requirement was GBP2.1m (2015: GBP1.7m).
The following table demonstrates how cash generated from
operations was applied:
Unrestricted bank balances at the beginning of the year GBP8.2m
Cash generated from operating activities excluding from associates and movements in restricted GBP12.9m
balances
Proceeds from sale of associates GBP2.7m
Interest received GBP0.1m
Dividends received from associates GBP0.6m
Dividends paid (GBP10.9m)
Tax paid (GBP2.3m)
Capital expenditure (GBP0.3m)
Investments in associates (GBP0.2m)
Unrestricted bank balances at the end of the year GBP10.8m
The Group's treasury strategy is to reduce risk by spreading
deposits across a number of institutions rather than to seek
marginal improvements in returns.
(1) GBP2.7m profit on disposal of 49% stake in Capital Private
Finance Limited
(2) Cash flow from operating activities adjusted for movements
in non-trading items including loans to ARs, loans to associates
and other non-trade receivables as a % of operating profit. This is
now calculated using cash flow before income taxes paid as a fairer
representation of cash conversion as % of operating profit.
Excluding increases in restricted cash balances of GBP2.1m, cash
conversion for the year ended 31 December 2016 would have been 111%
(2015: 95%).
INDEPENT AUDITOR'S REPORT TO THE MEMBERS OF MORTGAGE ADVICE
BUREAU (HOLDINGS) PLC
We have audited the financial statements of Mortgage Advice
Bureau (Holdings) plc for the year ended 31 December 2016 which
comprise the group statement of financial position and company
balance sheet, the group statement of comprehensive income, the
group statement of cash flows, the group statement of changes in
equity and the related notes. The financial reporting framework
that has been applied in the preparation of the group financial
statements is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the European Union. The financial
reporting framework that has been applied in preparation of the
parent company financial statements is applicable law and United
Kingdom Accounting Standards (United Kingdom Generally Accepted
Accounting Practice).
This report is made solely to the company's members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the
company's members those matters we are required to state to them in
an auditor's report and for no other purpose. To the fullest extent
permitted by law, we do not accept or assume responsibility to
anyone other than the company and the company's members as a body,
for our audit work, for this report, or for the opinions we have
formed.
Respective responsibilities of directors and auditors
As explained more fully in the statement of directors'
responsibilities, the directors are responsible for the preparation
of the financial statements and for being satisfied that they give
a true and fair view. Our responsibility is to audit and express an
opinion on the financial statements in accordance with applicable
law and International Standards on Auditing (UK and Ireland). Those
standards require us to comply with the Financial Reporting
Council's (FRC's) Ethical Standards for Auditors.
Scope of the audit of the financial statements
A description of the scope of an audit of financial statements
is provided on the FRC's website at
www.frc.org.uk/auditscopeukprivate.
Opinion on financial statements
In our opinion:
-- the financial statements give a true and fair view of the
state of the group's and the parent company's affairs as at 31
December 2016 and of the group's profit for the year then
ended;
-- the group financial statements have been properly prepared in
accordance with IFRSs as adopted by the European Union;
-- the parent company's financial statements have been properly
prepared in accordance with United Kingdom Generally Accepted
Accounting Practice; and
-- the financial statements have been prepared in accordance
with the requirements of the Companies Act 2006.
Opinion on other matters prescribed by the Companies Act
2006
In our opinion, based on the work undertaken in the course of
the audit:
-- the information given in the strategic report and directors'
report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
-- the strategic report and directors' report have been prepared
in accordance with applicable legal requirements.
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the group and
the parent company and its environment obtained in the course of
the audit, we have not identified material misstatements in the
strategic report or the directors' report.
We have nothing to report in respect of the following matters
where the Companies Act 2006 requires us to report to you if, in
our opinion:
-- adequate accounting records have not been kept by the parent
company, or returns adequate for our audit have not been received
from branches not visited by us; or
-- the parent company financial statements are not in agreement
with the accounting records and returns; or
-- certain disclosures of directors' remuneration specified by law are not made; or
-- we have not received all the information and explanations we require for our audit.
Leigh Treacy (senior statutory auditor)
For and on behalf of BDO LLP, statutory auditor
London
27 March 2017
BDO LLP is a limited liability partnership registered in England
and Wales (with registered number OC305127).
Consolidated statement of comprehensive income
for the year ended 31 December 2016
Note
2016 2015
GBP'000 GBP'000
----------------------------------------- ---------- --------- ---------
Revenue 3 92,848 75,466
Cost of sales 4 (70,700) (57,173)
----------------------------------------- ---------- --------- ---------
Gross profit 22,148 18,293
Administrative expenses (10,296) (8,722)
Share of profit of associates 13 611 703
----------------------------------------- ---------- --------- ---------
Operating profit 12,463 10,274
Finance income 7 73 143
Exceptional profit on disposal
of asset held for sale 13 2,690 -
Profit before tax 15,226 10,417
Tax expense 8 (2,307) (1,759)
----------------------------------------- ---------- --------- ---------
Profit for the year attributable
to equity holders of parent
company 12,919 8,658
----------------------------------------- ---------- --------- ---------
Other comprehensive income
Other comprehensive income
to be reclassified to
profit or loss in subsequent
periods (net of tax):
Net gain on asset held 2,152 -
for sale
Transfer to realised profit (2,152) -
---------------------------------------- --------- --------------------
Net other comprehensive
income to be reclassified - -
to profit and loss in
subsequent periods net
of tax
Other comprehensive income - -
Total comprehensive income
attributable to equity
holders of parent company 12,919 8,658
----------------------------------------- --------- --------------------
Earnings per share attributable to the
owners of the parent company
Basic 9 25.6p 17.2p
----------------------------------------- ---------- --------- ---------
Diluted 9 25.2p 16.7p
----------------------------------------- ---------- --------- ---------
Consolidated statement of financial position
as at 31 December 2016
2016 2015
Note GBP'000 GBP'000
------------------------------- ------ --------- ---------
Assets
Non-current assets
Property, plant and
equipment 11 2,720 2,621
Goodwill 12 4,114 4,114
Other intangible assets 12 9 27
Investments 13 1,008 715
Deferred tax asset 20 72 -
Total non-current assets 7,923 7,477
------------------------------- ------ --------- ---------
Current assets
Trade and other receivables 15 3,256 2,852
Cash and cash equivalents 16 18,711 13,956
------------------------------- ------ --------- ---------
Total current assets 21,967 16,808
------------------------------- ------ --------- ---------
Total assets 29,890 24,285
------------------------------- ------ --------- ---------
Equity and liabilities
Equity attributable to owners
of the parent company
Share capital 21 51 51
Share premium 3,042 3,042
Capital redemption
reserve 20 20
Share option reserve 380 157
Retained earnings 11,680 9,635
------------------------------- ------ --------- ---------
Total equity 15,173 12,905
------------------------------- ------ --------- ---------
Liabilities
Non-current liabilities
Contingent consideration 13 50 -
Provisions 19 1,219 918
Deferred tax liability 20 40 28
------------------------------- ------ --------- ---------
Total non-current liabilities 1,309 946
------------------------------- ------ --------- ---------
Current liabilities
Trade and other payables 17 12,405 9,519
Corporation tax liability 1,003 915
------------------------------- ------ --------- ---------
Total current liabilities 13,408 10,434
------------------------------- ------ --------- ---------
Total liabilities 14,717 11,380
------------------------------- ------ --------- ---------
Total equity and liabilities 29,890 24,285
------------------------------- ------ --------- ---------
Consolidated statement of changes in equity
for the year ended 31 December 2016
Capital Share
Share Share redemption option Retained Total
capital premium reserve reserve earnings Equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------- --------- ---------- ------------ --------- ----------- -----------
Balance at 1
January 2015 51 3,042 20 11 4,497 7,621
Profit for the
year - - - - 8,658 8,658
----------------------- --------- ---------- ------------ --------- ----------- -----------
Total comprehensive
income - - - - 8,658 8,658
----------------------- --------- ---------- ------------ --------- ----------- -----------
Transactions
with owners
Share based
payment transactions - - - 146 - 146
Redemption of
shares - - - - (38) (38)
Dividends paid - - - - (3,482) (3,482)
----------------------- --------- ---------- ------------ --------- ----------- -----------
Transactions
with owners - - - 146 (3,520) (3,374)
----------------------- --------- ---------- ------------ --------- ----------- -----------
Balance at 31
December 2015
and 1 January
2016 51 3,042 20 157 9,635 12,905
Profit for the
year - - - - 12,919 12,919
Total comprehensive
income - - - - 12,919 12,919
----------------------- --------- ---------- ------------ --------- ----------- -----------
Transactions
with owners
Share based
payment transactions - - - 223 - 223
Dividends paid - - - - (10,874) (10,874)
Transactions
with owners - - - 223 (10,874) (10,651)
----------------------- --------- ---------- ------------ --------- ----------- -----------
At 31 December
2016 51 3,042 20 380 11,680 15,173
----------------------- --------- ---------- ------------ --------- ----------- -----------
Consolidated statement of cash flows
for the year ended 31 December 2016
Notes 2016 2015
GBP'000 GBP'000
------------------------------- ------ ---------- ---------
Cash flows from operating
activities
Profit for the year before
tax 15,226 10,417
Adjustments for
Depreciation of property,
plant and equipment 11 193 131
Amortisation of intangibles 12 18 18
Profit on disposal of (2,690) -
asset held for sale
Share based payments 223 146
Share of profit from
associates 13 (611) (703)
Dividends received from
associates 13 567 586
Finance income 7 (73) (143)
------------------------------- ------ ---------- ---------
12,853 10,452
Changes in working capital
(Increase)/decrease in
trade and other receivables (405) 69
Increase in trade and
other payables 2,886 1,611
Increase in provisions 301 167
Cash generated from operating
activities 15,635 12,299
Income taxes paid (2,278) (1,343)
------------------------------- ------ ---------- ---------
Net cash inflow from
operating activities 13,357 10,956
------------------------------- ------ ---------- ---------
Cash flows from investing
activities
Purchase of property,
plant and equipment 11 (292) (2,548)
Proceeds from sale of 2,694 -
associate
Acquisitions of associates
and investments 13 (203) (345)
------------------------------- ------ ---------- ---------
Net cash inflow/(outflow)
from investing activities 2,199 (2,893)
------------------------------- ------ ---------- ---------
Cash flows from financing
activities
Interest received 7 73 143
Redemption of shares - (38)
Dividends paid 10 (10,874) (3,482)
------------------------------- ------ ---------- ---------
Net cash outflow from
financing activities (10,801) (3,377)
------------------------------- ------ ---------- ---------
Net increase in cash
and cash equivalents 4,755 4,686
Cash and cash equivalents
at the beginning of year 13,956 9,270
------------------------------- ------ ---------- ---------
Cash and cash equivalents
at the end of the year 18,711 13,956
------------------------------- ------ ---------- ---------
Notes to the consolidated financial statements
for the year ended 31 December 2016
1 Accounting policies
Basis of preparation
The principal accounting policies adopted in the preparation of
the financial statements are set out below. The policies have been
consistently applied to all the years presented.
These financial statements have been prepared under the
historical cost convention and in accordance with International
Financial Reporting Standards, International Accounting Standards
and Interpretations (collectively IFRSs) issued by the
International Accounting Standards Board (IASB) as adopted by the
European Union ("adopted IFRSs") and with those parts of the
Companies Act 2006 that are applicable to companies that prepare
financial statements in accordance with IFRSs.
The preparation of financial statements in compliance with
adopted IFRS requires the use of certain critical accounting
estimates. It also requires Group management to exercise judgement
in applying the Group's accounting policies. The areas where
significant judgements and estimates have been made in preparing
the financial statements and their effect are disclosed in note
2.
The Group's business activities, together with the factors
likely to affect its future development, performance and position
are set out in the Strategic Report as set out earlier in this
announcement. The financial position of the Group, its cash flows
and liquidity position are described in these financial
statements.
The Group made an operating profit of GBP12.5m during 2016
(2015: GBP10.3 million) and had net current assets of GBP8.6m at 31
December 2016 (31 December 2015: GBP6.4m) and equity attributable
to owners of the Group of GBP15.2m (31 December 2015:
GBP12.9m).
After making enquiries, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. Accordingly, they
continue to adopt the going concern basis in preparing the annual
report and accounts.
Changes in accounting policies
New standards, interpretations and amendments effective year
ended 31 December 2016
The following new standards, interpretations and amendments are
effective for annual periods beginning on or after 1 January 2016
and have been applied in preparing these financial statements. None
of these new standards or interpretations have a significant impact
on the annual consolidated financial statements of the Group.
-- Amendments to IFRS11 "Accounting for Acquisitions of
Interests in Joint Operations" This provides guidance on how to
account for the acquisition of joint operations that constitute a
business as defined in IFRS 3 Business Combinations. It is
effective for accounting periods beginning on or after 1 January
2016.
-- Amendments to IAS 16 and IAS 38 "Clarification of Acceptable
Methods of Depreciation and Amortisation". The amendment to IAS 16
prohibits entities from using a revenue-based depreciation method
for items of property, plant and equipment. The amendment to IAS 38
introduces a rebuttable presumption that revenue is not an
appropriate basis for amortisation of intangible assets. It is
effective for accounting periods beginning on or after 1 January
2016. These amendments are not expected to have any impact to the
Group given that the Group has not used a revenue-based method to
depreciate its non-current assets.
Notes to the consolidated financial statements
for the year ended 31 December 2016 (continued)
1 Accounting policies (continued)
New standards, interpretations and amendments effective year
ended 31 December 2016 (continued)
-- Amendments to IAS 27 "Equity Method in Separate Financial
Statements". The amendment will allow entities to use the equity
method to account for investments in subsidiaries, joint ventures
and associates in their separate financial statements. Entities
already applying IFRS and electing to change to the equity method
in its separate financial statements will have to apply that change
retrospectively. These amendments are effective for annual periods
beginning on or after 1 January 2016. These amendments will not
have any impact on the Group's consolidated financial
statements.
-- Amendments to IAS 1 Disclosure Initiative. The amendments to
IAS 1 Presentation of Financial Statements clarify, rather than
significantly change, existing IAS 1 requirements. The amendments
clarify:
-- The materiality requirements in IAS 1
-- That specific line items in the statement(s) of profit or
loss and other comprehensive income and the statement of financial
position may be disaggregated
-- That entities have flexibility as to the order in which they
present the notes to financial statements
-- That the share of other comprehensive income of associates
and joint ventures accounted for using the equity method must be
presented in aggregate as a single line item, and classified
between those items that will or will not be subsequently
reclassified to the statement of comprehensive income.
Furthermore, the amendments clarify the requirements that apply
when additional subtotals are presented in the statement of
financial position and the statement(s) of profit or loss and other
comprehensive income. These amendments are effective for annual
periods beginning on or after 1 January 2016, with early adoption
permitted. These amendments are not expected to have any material
impact on the Group.
-- Amendments to IFRS 10, IFRS 12 and IAS 28 Investment
Entities: Applying the Consolidation Exception. The amendments
address issues that have arisen in applying the investment entities
exception under IFRS 10 Consolidated Financial Statements. The
amendments to IFRS 10 clarify that the exemption from presenting
consolidated financial statements applies to a parent entity that
is a subsidiary of an investment entity, when the investment entity
measures all of its subsidiaries at fair value.
Furthermore, the amendments to IFRS 10 clarify that only a
subsidiary of an investment entity that is not an investment entity
itself and that provides support services to the investment entity
is consolidated. All other subsidiaries of an investment entity are
measured at fair value. The amendments to IAS 28 Investments in
Associates and Joint Ventures allow the investor, when applying the
equity method, to retain the fair value measurement applied by the
investment entity associate or joint venture to tis interests in
subsidiaries.
These amendments are applied retrospectively and do not have any
impact on the Group as the Group does not apply the consolidation
exception.
Notes to the consolidated financial statements
for the year ended 31 December 2016 (continued)
1 Accounting policies (continued)
New standards, interpretations and amendments effective year
ended 31 December 2016 (continued)
Annual Improvements 2012-2014 Cycle
These improvements are effective for annual periods beginning on
or after 1 January 2016. They include:
-- IFRS 5 Non-current Assets Held for Sale and Discontinued
Operations. Assets (or disposal groups) are generally disposed of
either through sale or distribution to the owners. The amendment
clarifies that changing from one of these disposal methods to the
other would not be considered a new plan of disposal, rather it is
a continuation of the original plan. There is, therefore, no
interruption of the application of the requirements in IFRS 5. This
amendment is applied prospectively.
-- IFRS 7 Financial Instruments: Disclosures
(i) Servicing contracts
The amendment clarifies that a servicing contract that includes
a fee can constitute continuing involvement in a financial asset.
An entity must assess the nature of the fee and the arrangement
against the guidance for continuing involvement set out in IFRS 7
in order to assess whether the disclosures are required. The
assessment of which servicing contracts constitute continuing
involvement must be made retrospectively. However, the required
disclosure need not be provided for any period beginning before the
annual period in which the entity first applies the amendments.
(ii) Applicability of the amendments to IFRS 7 to condensed interim financial statements
The amendment clarifies that the offsetting disclosure
requirements do not apply to condensed interim financial
statements, unless such disclosures provide a significant update to
the information reported in the most recent annual report. This
amendment is applied retrospectively.
-- IAS 19 Employee Benefits. The amendment clarifies that market
depth of high quality corporate bonds is assessed based on the
currency in which the obligation is denominated, rather than the
country where the obligation is located. When there is no deep
market for high quality corporate bonds in that currency,
government bond rates must be used. This amendment must be applied
prospectively.
-- IAS 34 Interim Financial Reporting. The amendment clarifies
that the required interim disclosures must either be in the interim
financial statements or incorporated by cross-reference between the
interim financial statements and wherever they are included within
the interim financial report (e.g. in the management commentary or
risk report). The other information within the interim financial
report must be available to users on the same terms as the interim
financial statements and at the same time. This amendment must be
applied retrospectively.
These amendments are not expected to have any impact on the
Group.
Notes to the consolidated financial statements
for the year ended 31 December 2016
1 Accounting policies (continued)
New standards, interpretations and amendments not yet
effective
The standards and interpretations that are issued, but not yet
effective, up to the date of issuance of the Group's financial
statements are disclosed below. The Group intends to adopt these
standards, if applicable, when they become effective.
-- IAS 7 Disclosure Initiative - Amendments to IAS 7. The
amendments to IAS 7 Statement of Cash Flows are part of the IASB's
Disclosure Initiative and require an entity to provide disclosures
that enable users of financial statements to evaluate changes in
liabilities arising from financing activities, including both
changes arising from cash flows and non-cash changes. On initial
application of the amendment, entities are not required to provide
comparative information for preceding periods. These amendments are
effective for annual periods beginning on or after 1 January 2017,
with early application permitted. Application of the amendments
will result in additional disclosures provided by the Group.
-- IAS 12 Recognition of Deferred Tax Assets for Unrealised
Losses - Amendments to IAS 12. The amendments clarify that an
entity needs to consider whether tax law restricts the sources of
taxable profits against which it may make deductions on the
reversal of that deductible temporary difference. Furthermore, the
amendments provide guidance on how an entity should determine
future taxable profits and explain the circumstances in which
taxable profit may include the recovery of some assets for more
than their carrying amount.
Entities are required to apply the amendments retrospectively.
However, on initial application of the amendments, the change in
the opening equity of the earliest comparative period may be
recognised in the opening retained earnings (or in another
component of equity, as appropriate), without allocating the change
between opening retained earnings and other components of equity.
Entities applying this relief must disclose that fact. These
amendments are effective for annual periods beginning on or after 1
January 2017 with early application permitted. If an entity applies
the amendments for an earlier period, it must disclose that fact.
These amendments are not expected to have any impact on the
Group.
-- IFRS 9 Financial Instruments. This will eventually replace
IAS 39 in its entirety. However, the process has been divided into
three main components (classification and measurement, impairment
and hedge accounting). This standard becomes effective for
accounting periods beginning on or after 1 January 2018. Its
adoption may result in changes to the classification and
measurements of the Group's financial instruments, including any
impairment thereof.
-- IFRS 15 Revenue from Contracts with Customers. This was
issued by the IASB on 28 May 2014 and applies to an entity's first
annual IFRS financial statements for a period beginning on or after
1 January 2018. It sets out the requirements for recognising
revenue that apply to contracts with customers, except for those
covered by standards on leases, insurance contracts and financial
instruments. This amendment is not expected to have any impact on
the Group.
-- IFRS 2 Classification and Measurement of Share-based Payment
Transactions - Amendments to IFRS 2. The IASB issued amendments to
IFRS 2 Share-based Payment that address three main areas: the
effects of vesting conditions on the measurement of cash-settled
share-based payment transaction; the classification of a
share-based payment transaction with net settlement features for
withholding tax obligations; and accounting where a modification to
the terms and conditions of a share-based payment transaction
changes its classification from cash-settled to equity-settled.
Notes to the consolidated financial statements
for the year ended 31 December 2016
1 Accounting policies (continued)
New standards, interpretations and amendments not yet effective
(continued)
On adoption, entities are required to apply the amendments
without restating prior periods, but retrospective application is
permitted if elected for all three amendments and other criteria
are met. The amendments are effective for annual periods beginning
on or after 1 January 2018, with early application permitted. The
Group is assessing the potential effect of the amendments on its
consolidated financial statements.
-- IFRS 16 Leases. IFRS 16 was issued in January 2016 and it
replaces IAS 17 Leases, IFRIC 4 Determining whether an Arrangement
contains a Lease, SIC-15 Operating Leases-Incentives and SIC-27
Evaluating the Substance of Transactions involving the Legal Form
of a Lease. IFRS 16 sets out the principles for the recognition,
measurement, presentation and disclosure of leases and requires
lessees to account for all leases under a single on-balance sheet
model similar to the accounting for finance leases under IAS 17.
The standard includes two recognition exemptions for lessees -
leases of 'low-value' assets (e.g., personal computers) and
short-term leases (i.e., leases with a lease term of 12 months or
less). At the commencement date of a lease, a lessee will recognise
a liability to make lease payments (i.e., the lease liability) and
an asset representing the right to use the underlying asset during
the lease term (i.e., the right-of-use asset). Lessees will be
required to separately recognise the interest expenses on the lease
liability and the depreciation expense on the right-of-use
asset.
Lessees will be also required to remeasure the lease liability
upon the occurrence of certain events (e.g. a change in the lease
term, a change in future lease payments resulting from a change in
an index or rate used to determine those payments). The lessee will
generally recognise the amount of the remeasurement of the lease
liability as an adjustment to the right-of-use asset.
Lessor accounting under IFRS 16 is substantially unchanged from
today's accounting under IAS 17. Lessors will continue to classify
all leases using the same classification principle as in IAS 17 and
distinguish between two types of leases: operating and finance
leases.
IFRS 16 also requires lessees and lessors to make more extensive
disclosures than under IAS 17.
IFRS 16 is effective for annual periods beginning on or after 1
January 2019. Early application is permitted, but not before an
entity applies IFRS 15. A lessee can choose to apply the standard
using either a full retrospective or a modified retrospective
approach. The standard's transition provisions permit certain
reliefs.
These amendments are not expected to have any impact on the
Group.
Notes to the consolidated financial statements
for the year ended 31 December 2016
1 Accounting policies (continued)
New standards, interpretations and amendments not yet effective
(continued)
-- Amendments to IFRS 10 and IAS 28: Sale or contribution of
Assets between an Investor and its Associate or Joint Venture. The
amendments address the conflict between IFRS 10 and IAS 28 in
dealing with the loss of control of a subsidiary that is sold or
contributed to an associate or joint venture. The amendments
clarify that the gain or loss resulting from the sale or
contribution of assets that constitute a business, as defined in
IFRS 3, between an investor and its associate or joint venture, is
recognised in full. Any gain or loss resulting from the sale or
contribution of assets that do not constitute a business, however,
is recognised only to the extent of unrelated investors' interests
in the associate or joint venture. The IASB has deferred the
effective date of these amendments indefinitely, but an entity that
early adopts the amendments must apply them prospectively. The
Group will apply these amendments when they become effective.
Basis of consolidation
Where the company has control over an investee, it is classified
as a subsidiary. The company controls an investee if all three of
the following elements are present: power over the investee,
exposure to variable returns from the investee, and the ability of
the investor to use its power to affect those variable returns.
Control is reassessed whenever facts and circumstances indicate
that there may be a change in any of these elements of control.
The consolidated financial statements present the results of the
company and its subsidiaries ("the Group") as if they formed a
single entity. Intercompany transactions and balances between group
companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of
business combinations using the acquisition method. In the
statement of financial position, the acquiree's identifiable
assets, liabilities and contingent liabilities are initially
recognised at their fair values at the acquisition date. The
results of acquired operations are included in the consolidated
statement of comprehensive income from the date on which control is
obtained. They are deconsolidated from the date on which control
ceases.
Entities that are not subsidiaries but where the Group has
significant influence (i.e. the power to participate in the
financial and operating policy decisions) are accounted for as
associates.
The results and assets and liabilities of the associates are
included in the consolidated accounts using the equity method of
accounting.
Notes to the consolidated financial statements
for the year ended 31 December 2016
1 Accounting policies (continued)
Property, plant and equipment
Items of property, plant and equipment are initially recognised
at cost. As well as the purchase price, cost includes directly
attributable costs.
Depreciation is provided on all items of property, plant and
equipment at rates calculated to write off the cost of each asset
on a straight line basis over its expected useful lives, as
follows:
Freehold land not depreciated
Freehold buildings 36 years
Fixtures and fittings 20%
Computer equipment 33%
Gains and losses on disposal are determined by comparing the
proceeds with the carrying amount and are recognised in the income
statement. The Directors reassess the useful economic life of the
assets annually.
Goodwill
Goodwill represents the excess of the cost of a business
combination over, in the case of business combinations completed
prior to 1 January 2011, the Group's interest in the fair value of
identifiable assets, liabilities and contingent liabilities
acquired. For business combinations completed after 1 January 2011,
the goodwill represents the excess of a cost of a business
combination over the Group's interest in the fair value of
identifiable assets under IFRS 3 Business Combinations.
Goodwill is capitalised as an intangible asset with any
impairment in carrying value being charged to the consolidated
statement of comprehensive income. Where the fair value of
identifiable assets, liabilities and contingent liabilities exceed
the fair value of consideration paid, the excess is credited in
full to the consolidated statement of comprehensive income on the
acquisition date.
Other intangible assets
Intangible assets other than goodwill acquired by the Group
comprise licences and are stated at cost less accumulated
amortisation and impairment losses. Amortisation is charged to the
statement of comprehensive income within administrative expenses on
a straight line basis over the period of the licence agreements.
Assets are tested annually for impairment or more frequently if
events or circumstances indicate potential impairment.
Amortisation, which is reviewed annually, is provided on
licences at 16.7% per annum, calculated to write off the cost of
the asset on a straight line basis over its expected useful
life.
Notes to the consolidated financial statements
for the year ended 31 December 2016 (continued)
1 Accounting policies (continued)
Impairment of non-financial assets
Impairment tests on goodwill and other intangible assets with
indefinite useful economic lives are undertaken annually at the
financial year end. Other non-financial assets are subject to
impairment tests whenever events or changes in circumstances
indicate that their carrying amount may not be recoverable. Where
the carrying value of the asset exceeds its recoverable amount
(i.e. the higher of value in use and fair value less costs to
sell), the asset is written down accordingly.
Where it is not possible to estimate the recoverable amount of
an individual asset, the impairment test is carried out on the
smallest group of assets to which it belongs for which there are
separately identifiable cash flows, its cash generating units
('CGUs'). Goodwill is allocated on initial recognition to each of
the group's CGUs that are expected to benefit from the synergies of
the combination giving rise to the goodwill.
Unquoted investments
Unquoted investments are shown at cost less provision for
impairment.
Financial assets
In the consolidated statement of financial position, the Group
classifies its financial assets as loans, trade receivables and
cash and cash equivalents. The classification depends on the
purpose for which the financial assets were acquired. Loans and
trade receivables are non-derivative financial assets with fixed or
determinable payments which arise principally through the Group's
trading activities. These are recognised at original fair value
less appropriate provision for impairment and subsequently measured
at amortised cost.
Impairment provisions are recognised when there is objective
evidence (such as significant financial difficulties on the part of
the counterparty or default or significant delay in payment) that
the Group will be unable to collect all of the amounts, the amount
of such a provision being the difference between the net carrying
amount and the present value of the future expected cash flows
associated with the impaired receivable. For trade receivables,
which are reported net, such provisions are recorded in a separate
allowance account with the loss being recognised within cost of
sales in the consolidated statement of comprehensive income. On
confirmation that the trade receivable will not be collectable, the
gross carrying value of the asset is written off against the
associated provision.
Cash and cash equivalents include cash in hand and deposits held
at call with banks with an original maturity of three months or
less.
Trade and other payables
Trade and other payables are recognised initially at fair value
and subsequently carried at amortised cost.
Retirement benefits: Defined contribution schemes
Contributions to defined contribution pension schemes are
charged to the consolidated statement of comprehensive income in
the year to which they relate.
Notes to the consolidated financial statements
for the year ended 31 December 2016 (continued)
1 Accounting policies (continued)
Provisions
A provision is recognised in the statement of financial position
when the Group has a present legal or constructive obligation as a
result of a past event, and it is probable that an outflow of
economic benefits will be required to settle the obligation.
Share capital
Financial instruments issued by the Group are treated as equity
only to the extent that they do not meet the definition of a
financial liability. The Company's ordinary shares are classified
as equity instruments. Incremental costs directly attributable to
the issue of new shares are shown in share premium as a deduction
from the proceeds.
Revenue
Revenue comprises commissions, client fees and other income.
Commissions and client fees are included at the gross amounts
receivable by the Group in respect of all services provided.
Commissions payable to trading partners in respect of their share
of the commissions earned are included in cost of sales.
Commissions and client fees earned are accounted for when
received or guaranteed to be received, as until received it is not
possible to be certain that the transaction will be completed. In
the case of life commissions there is a possibility for a period
after the inception of the policy that part of the commission
earned may have to be repaid if the policy is cancelled during this
period. A provision is made for the expected level of commissions
repayable.
Other income comprises income from ancillary services such as
survey and conveyancing fees and is credited to the statement of
comprehensive income partly on an accruals basis.
Leased assets
Rentals under operating leases are charged on a straight line
basis over the lease term, even if the payments are not made on
such a basis. Benefits received and receivable as an incentive to
sign an operating lease are similarly spread on a straight line
basis over the lease term.
Finance income
Finance income comprises interest receivable on cash at bank.
Interest income is recognised in the statement of comprehensive
income as it accrues.
Exceptional items
As permitted by IAS 1 'Presentation and disclosure' - certain
items are presented separately in the income statement as
exceptional where, in the judgement of the Directors, they need to
be disclosed by virtue of their nature, size or incidence in order
to obtain a clear and consistent presentation of the Group's
underlying business performance. Examples of material and
non-recurring items which may give rise to disclosure as
exceptional items include asset impairments, costs associated with
acquiring new businesses and profits on the disposal of
investments.
Notes to the consolidated financial statements
for the year ended 31 December 2016 (continued)
1 Accounting policies (continued)
Taxation
Income tax comprises current and deferred tax. Income tax is
recognised in profit or loss other than if it relates to items
recognised in other comprehensive income in which case it is
recognised in other comprehensive income.
Current tax is the expected tax payable on the taxable income
for the year using tax rates enacted or substantively enacted by
the statement of financial position date and any adjustment to tax
payable in respect of previous years.
Deferred tax assets and liabilities are recognised where the
carrying amount of an asset or liability in the consolidated
statement of financial position differs from its tax base, except
for differences arising on investments in subsidiaries and jointly
controlled entities where the Group is able to control the timing
of the reversal of the difference and it is probable that the
difference will not reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those
instances where it is probable that taxable profit will be
available against which the difference can be utilised.
The amount of the asset or liability is determined using tax
rates that have been enacted or substantially enacted by the
statement of financial position date and are expected to apply when
the deferred tax liabilities or assets are settled or recovered.
Deferred tax balances are not discounted.
Deferred tax assets and liabilities are offset when the Group
has a legally enforceable right to offset current tax assets and
liabilities and the deferred tax assets and liabilities relate to
taxes levied by the same tax authority on either:
-- the same taxable group company, or
-- different company entities which intend either to settle
current tax assets and liabilities on a net basis, or to realise
the assets and settle the liabilities simultaneously, in each
future period in which significant amounts of deferred tax assets
and liabilities are expected to be settled or recovered.
Segment Reporting
An operating segment is a distinguishable segment of an entity
that engages in business activities from which it may earn revenues
and incur expenses and whose operating results are reviewed
regularly by the entity's chief operating decision maker (CODM).
The Board reviews the Group's operations and financial position as
a whole and therefore considers that it has only one operating
segment, being the provision of financial services operating solely
within the UK. The information presented to the CODM directly
reflects that presented in the financial statements and they review
the performance of the Group by reference to the results of the
operating segment against budget.
Operating profit is the profit measure, as disclosed on the face
of the combined income statement that is reviewed by the CODM.
Notes to the consolidated financial statements
for the year ended 31 December 2016 (continued)
1 Accounting policies (continued)
Dividends
Dividends are recognised when they become legally payable. In
the case of interim dividends to equity shareholders, this is when
they are paid. In the case of final dividends, this is when they
are approved by the shareholders.
Share-based payments
Where equity-settled share options are awarded to employees, the
fair value of the options at the date of grant is charged to the
statement of comprehensive income over the vesting period.
Non-market vesting conditions are taken into account by adjusting
the number of equity instruments expected to vest at each reporting
date so that, ultimately, the cumulative amount recognised over the
vesting period is based on the number of options that eventually
vest. Non-vesting conditions and market vesting conditions are
factored into the fair value of the options granted. As long as all
other vesting conditions are satisfied, a charge is made
irrespective of whether the market vesting conditions are
satisfied. The cumulative expense is not adjusted for failure to
achieve a market vesting condition or where a non-vesting condition
is not satisfied.
Where the terms and conditions of options are modified before
they vest, the increase in the fair value of the options, measured
immediately before and after the modification, is also charged to
the statement of comprehensive income over the remaining vesting
period.
Where options are granted to persons other than employees, the
statement of comprehensive income is charged with the fair value of
the options at the date of the grant over the vesting period.
Notes to the consolidated financial statements
for the year ended 31 December 2016 (continued)
2 Critical Accounting Estimates and Judgements
The Group makes certain estimates and assumptions regarding the
future. Estimates and judgements are continually evaluated based on
historical experience and other factors, including expectations of
future events that are believed to be reasonable under the
circumstances. In the future, actual experience may differ from
these estimates and assumptions. The Directors consider that the
estimates and judgements that have the most significant effect on
the carrying amounts of assets and liabilities within the financial
statements are set out below.
(a) Impairment of goodwill
The Group is required to test, on an annual basis, whether
goodwill has suffered any impairment. The recoverable amount is
determined based on value in use calculations. The use of this
method requires the estimation of future cash flows and the choice
of a discount rate in order to calculate the present value of the
cash flows. Actual outcomes may vary. More information including
carrying values is included in note 12.
(b) Impairment of trade and other receivables
Judgement is required when determining if there is any
impairment to the trade and other receivable balances. Trade
receivables are reviewed for impairment if they are past due and
are not repaid within the terms of the contracts. Other
receivables, which include loans, are reviewed for impairment when
there are any indications that they may not be recoverable and that
security held against the balance may be inadequate to fully cover
the amount outstanding. A provision for impairment will be made if
following review of the balances, the Group considers it unlikely
that any balance will be recovered. More information is included in
note 15.
(c) Clawback Provision
The provision relates to the estimated value of repaying
commission received up front on life assurance policies that may
lapse in a period of up to four years following inception. The
provision is calculated using a model that has been developed over
several years. The model uses a number of factors including the
total unearned commission at the point of calculation, the age
profile of the commission received, the Group's proportion of any
clawback, likely future lapse rates, and the success of the Group's
team that focuses on preventing lapses and/or generating new income
at the point of a lapse. More information is included in note
19.
(d) Freehold building
The freehold building is depreciated over its useful life. The
useful life is based on management's estimate of the period that
the asset will generate revenue and will be reviewed annually for
continued appropriateness. The carrying value will be tested for
impairment when there is an indication that the value of the asset
might be impaired. When carrying out an impairment test this would
be based on future cash flow forecasts and these forecasts would be
based on management judgement. No such indication of impairment has
been noted.
Notes to the consolidated financial statements
for the year ended 31 December 2016 (continued)
3 Revenue
The Group operates in one segment being that of the provision of
financial services in the UK. Revenue is derived as follows:
2016 2015
GBP'000 GBP'000
Mortgage related products 55,011 43,794
Insurance and other protection
products 36,444 30,412
Other income 1,393 1,260
--------------------------------- -------- --------
92,848 75,466
-------------------------------- -------- --------
4 Cost of sales
Costs of sales are as follows:
2016 2015
GBP'000 GBP'000
Commissions paid 69,380 56,148
Wages and salary costs 1,320 1,025
------------------------- -------- --------
70,700 57,173
------------------------ -------- --------
2016 2015
Wages and salary costs GBP'000 GBP'000
------------------------------- ---------- ---------
Gross 1,015 800
Employers' National Insurance 115 83
Pension 35 21
Other Direct Costs 155 121
1,320 1,025
------------------------------- ---------- ---------
Notes to the consolidated financial statements
for the year ended 31 December 2016 (continued)
5 Profit from operations
Profit from operations is stated after charging the
following:
2016 2015
GBP'000 GBP'000
--------------------------------- ---------- ----------
Depreciation of property, plant
and equipment 193 131
Amortisation of intangibles 18 18
Operating leases - 106
Auditors' remuneration:
Fees payable to the Group's
auditors for the audit of the
Group's financial statements. 10 10
Fees payable to the Group's
auditors for the audit of the
Group's subsidiary financial
statements. 27 24
--------------------------------- ---------- ----------
Other administrative expenses are incurred in the ordinary
course of the business and do not include any non-recurring
items.
Profits from associates are disclosed as part of the operating
profit as this is the operational nature of the Group.
6 Staff costs
Staff costs, including directors' remuneration, were as
follows:
2016 2015
GBP'000 GBP'000
------------------------------- ---------- ---------
Wages and salaries 6,410 5,629
Share based payments 315 250
Social security costs 712 618
Defined contribution pension
costs 150 113
------------------------------- ---------- ---------
7,587 6,610
------------------------------- ---------- ---------
The average number of people Number Number
employed by the Group during
the year was:
------------------------------- ---------- ---------
Executive Directors 3 3
Compliance 52 42
Sales and marketing 40 34
Operations 46 44
------------------------------- ---------- ---------
Total 141 123
------------------------------- ---------- ---------
Notes to the consolidated financial statements
for the year ended 31 December 2016 (continued)
6 Staff costs (continued)
Key management compensation
Key management are those persons having authority and
responsibility for planning, directing and controlling the
activities of the Group. These are the directors of Mortgage Advice
Bureau (Holdings) Plc.
2016 2015
GBP'000 GBP'000
------------------------------ --------- ---------
Wages and salaries 1,568 1,540
Share based payments 86 39
Defined contribution pension
costs 19 11
------------------------------ --------- ---------
1,673 1,590
------------------------------ --------- ---------
During the year retirement benefits were accruing to 1 director
(2015: 1) in respect of defined contribution pension schemes.
The total amount payable to the highest paid director in respect
of emoluments was GBP619,873 (2015: GBP653,217). The value of the
Group's contributions paid to a defined contribution pension scheme
in respect of the highest paid director amounted to GBPnil (2015:
GBPnil).
7 Finance income
2016 2015
GBP'000 GBP'000
----------------- ---------- ---------
Interest income 73 143
----------------- ---------- ---------
Notes to the consolidated financial statements
for the year ended 31 December 2016 (continued)
8 Income Tax
2016 2015
GBP'000 GBP'000
----------------------------------- ---------- ---------
Current tax expense
UK corporation tax charge on
profit for the year 2,367 1,870
Adjustments for over provision
in prior years - (114)
----------------------------------- ---------- ---------
Total current tax 2,367 1,756
----------------------------------- ---------- ---------
Deferred tax expense
Origination and reversal of
timing differences (58) 6
Adjustment for over provision
in prior years - (1)
Effect of change in tax rate
on opening liability (2) (2)
----------------------------------- ---------- ---------
Total Deferred Tax (see note
20) (60) 3
----------------------------------- ---------- ---------
Total tax expense 2,307 1,759
----------------------------------- ---------- ---------
The reasons for the difference between the
actual charge for the year and the standard
rate of corporation tax in the United Kingdom
of 20% (2015: 20.25%) applied to profit for
the year is as follows:
2016 2015
GBP'000 GBP'000
----------------------------------- ---------- ---------
Profit for the year before
tax 15,226 10,417
----------------------------------- ---------- ---------
Expected tax charge based on
corporation tax rate 3,045 2,109
Expenses not deductible for
tax purposes
amortisation and impairment 62 38
Adjustment for non-taxable (538) -
profit on sale of asset held
for sale
Research & Development allowances (148) (129)
Adjustments to tax charge in
respect of prior periods - (114)
Adjustment to deferred tax
charge in respect of prior
periods - (1)
Profits from associates (122) (142)
Effect of lower deferred tax 10 -
rate
Rate change on deferred tax
liability (2) (2)
----------------------------------- ---------- ---------
Total tax expense 2,307 1,759
----------------------------------- ---------- ---------
Changes in the taxation rate
Legislation to reduce the main rate of corporation tax to 19%
from 1 April 2017 and to 17% from 1 April 2020 had been enacted and
so the deferred tax balance has been calculated at 17% (2015:
18%).
Notes to the consolidated financial statements
for the year ended 31 December 2016 (continued)
9 Earnings Per Share
a) Earnings per share
Basic earnings per share are calculated by dividing net profit
for the year attributable to ordinary equity holders of the Company
by the weighted average number of ordinary shares outstanding
during the year.
2016 2015
Basic earnings per share GBP'000 GBP'000
----------------------------------- ----------- -----------
Profit for the year attributable
to the owners of the parent 12,919 8,658
----------------------------------- ----------- -----------
Weighted average number of shares
in issue 50,461,600 50,478,038
----------------------------------- ----------- -----------
Basic earnings per share (in
pence per share) 25.6p 17.2p
----------------------------------- ----------- -----------
For diluted earnings per share, the weighted
average number of ordinary shares in existence
is adjusted to include potential ordinary shares
arising from share options.
2016 2015
Diluted earnings per share GBP'000 GBP'000
----------------------------------- ----------- -----------
Profit for the year attributable
to the owners of the parent 12,919 8,658
----------------------------------- ----------- -----------
Weighted average number of shares
in issue 51,238,503 51,987,564
----------------------------------- ----------- -----------
Basic earnings per share (in
pence per share) 25.2p 16.7p
----------------------------------- ----------- -----------
The share data used in the basic and diluted earnings per share
computations are as follows:
Weighted average number of ordinary 2016 2015
shares
------------------------------------- ----------- -----------
Issued ordinary shares at start
of period 50,461,600 50,509,600
Effect of shares purchased during
period - (31,562)
------------------------------------- ----------- -----------
Basic weighted average number
of shares 50,461,600 50,478,038
Potential ordinary shares arising
from options 776,903 1,509,526
------------------------------------- ----------- -----------
Diluted weighted average number
of shares 51,283,503 51,987,564
------------------------------------- ----------- -----------
b) Adjusted earnings per share
2016 2015
GBP'000 GBP'000
----------------------------------- ----------- -----------
Profit for the year attributable
to the owners of the parent 12,919 8,658
Adjusted for the following items
net of tax:
Profit on disposal of asset held (2,690) -
for sale
----------------------------------- ----------- -----------
Adjusted earnings net of tax 10,229 8,658
----------------------------------- ----------- -----------
Weighted average number of shares
in issue 50,461,600 50,478,038
----------------------------------- ----------- -----------
Adjusted basic earnings per share
(in pence per share) 20.3p 17.2p
Adjusted diluted earnings per
share (in pence per share) 20.0p 16.7p
----------------------------------- ----------- -----------
Notes to the consolidated financial statements
for the year ended 31 December 2016 (continued)
10 Dividends
2016 2015
GBP'000 GBP'000
-------------------------
Dividends paid and declared
during the year:
Final dividend for 2015: 9.5p
per share (2014: 2.0p) 4,794 1,009
Special dividend: 4.25p per 2,145 -
share
Interim dividend for 2016:
7.8p per share (2015: 4.9p) 3,935 2,473
------------------------------------ ------- -------------------------
10,874 3,482
----------------------------------- ------- -------------------------
Equity dividends on ordinary
shares:
Further special dividend: 555 -
1.1p per share
Proposed for approval:
Final dividend for 2016: 10.5p
per share (2015: 9.5p) 5,298 4,794
--------------------------------- ------ ------
5,853 4,794
-------------------------------- ------ ------
The record date for the final dividend is 5 May 2017 and the
payment date is 31 May 2017.The ex-dividend date will be 4 May
2017.
Notes to the consolidated financial statements
for the year ended 31 December 2016 (continued)
11 Property, Plant and Equipment
Freehold
land Fixtures Computer
and & fittings equipment Total
building GBP'000 GBP'000 GBP'000
GBP'000
------------------- ---------- ------------- ------------ ----------
Cost
At 1 January 2016 2,409 288 588 3,285
Additions 52 147 93 292
At 31 December
2016 2,461 435 681 3,577
------------------- ---------- ------------- ------------ ----------
Depreciation
At 1 January 2016 13 240 411 664
Charge for the
year 54 27 112 193
At 31 December
2016 67 267 523 857
------------------- ---------- ------------- ------------ ----------
Net Book Value
At 31 December
2016 2,394 168 158 2,720
------------------- ---------- ------------- ------------ ----------
Freehold
land Fixtures Computer
and & fittings equipment Total
building GBP'000 GBP'000 GBP'000
GBP'000
------------------- ---------- ------------- ------------ ----------
Cost
At 1 January 2015 - 262 475 737
Additions 2,409 26 113 2,548
At 31 December
2015 2,409 288 588 3,285
------------------- ---------- ------------- ------------ ----------
Depreciation
At 1 January 2015 - 220 313 533
Charge for the
year 13 20 98 131
At 31 December
2015 13 240 411 664
------------------- ---------- ------------- ------------ ----------
Net Book Value
At 31 December
2015 2,396 48 177 2,621
Notes to the consolidated financial statements
for the year ended 31 December 2016 (continued)
12 Intangible Assets
Goodwill 2016 2015
GBP'000 GBP'000
------------------------ --------- ---------
Cost
As at 1 January and 31
December 4,267 4,267
-------------------------- --------- ---------
Accumulated impairment
At 1 January 153 153
At 31 December 153 153
-------------------------- --------- ---------
Net book value
At 31 December 4,114 4,114
-------------------------- --------- ---------
The goodwill relates to the acquisition of Talk Limited in 2012,
and in particular its main operating subsidiary Mortgage Talk
Limited. The goodwill is deemed to have an indefinite useful life.
It is currently carried at cost and is reviewed annually for
impairment.
Under IAS 36, "Impairment of assets", the Group is required to
review and test its goodwill annually each year or in the event of
a significant change in circumstances. The impairment review
conducted at the end of 2016 concluded that there had been no
impairment of goodwill and the recoverable amount is in excess of
GBP16 million.
The Board considers that it has only one operating segment and
therefore one cash generating unit so accordingly it is necessary
to assess the impact of the acquisition of Mortgage Talk Limited to
the Group. The value in use of Mortgage Talk Limited has therefore
been estimated based on the improvements in net profits which that
acquisition continues to bring to the Group. The forecast ongoing
profits generated by the acquisition of Mortgage Talk Limited
significantly exceed the value of goodwill and therefore no
impairment of the goodwill is required. A discount rate of 10% has
been applied to these calculations. Management has considered
forecast profits over a three year period in determining the value
in use. Management believes that any possible changes to any of the
key assumptions applied in determining the value in use would not
cause the carrying amount of goodwill to exceed the forecast
ongoing profits.
Licences 2016 2015
GBP'000 GBP'000
-------------------------- --------- ---------
Cost
As at 1 January and 31
December 108 108
---------------------------- --------- ---------
Accumulated Amortisation
At 1 January 81 63
Charge for the year 18 18
At 31 December 99 81
---------------------------- --------- ---------
Net book value
At 31 December 9 27
---------------------------- --------- ---------
Notes to the consolidated financial statements
for the year ended 31 December 2016 (continued)
13 Investments
GBP'000
-------------------------- --------
Investment in Associates 1,008
Other Investments -
-------------------------- --------
At 31 December 2016 1,008
-------------------------- --------
At 31 December 2015 715
-------------------------- --------
Investment in Associates
The Group holds investments in associates, all of which are
accounted for under the equity method, as follows:
Percentage
Reporting Country of ordinary
date of incorporation shares
Company name held Description
---------------------- ------------- ------------------- ------------- --------------
Property
England 49 surveyors
and Wales
CO2 Commercial 31 December
Limited
MAB Wealth Management England 49 Provision
Limited 31 December and Wales of financial
services
Freedom 365 Mortgage England 35 Provision
Solutions Limited 31 December and Wales of financial
services
England Conveyancing
Sort Group Limited 31 December and Wales 33.25 and software
development
services
Provision
England of financial
Buildstore Limited 31 December and Wales 25 services
Provision
Clear Mortgage England of financial
Solutions Limited 31 December and Wales 25 services
Provision
Vita Financial England of financial
Limited 31 December and Wales 20 services
Provision
MAB Broker Services of financial
PTY Limited 30 June Australia 45 services
---------------------- ------------- ------------------- ------------- --------------
Notes to the consolidated financial statements
for the year ended 31 December 2016 (continued)
13 Investments (continued)
Investment in Associates (continued)
The investment in associates at the reporting date is as
follows:
2016 2015
GBP'000 GBP'000
-------------------- --------- ---------
At 1 January 715 253
Additions 253 345
Disposals (4) -
Share of profit 611 703
Dividends received (567) (586)
-------------------- --------- ---------
At 31 December 1,008 715
-------------------- --------- ---------
The Group was entitled to 49% of the results for Capital Private
Finance Limited up to 30 June 2016. The Group is also entitled to
49% of the results of CO2 Commercial Limited, and MAB Wealth
Management Limited by virtue of its 49% equity stakes. CO2
Commercial Limited is a dormant holding company, and trades through
its wholly owned subsidiary, Pinnacle Surveyors (England &
Wales) Limited. The Group is entitled to 45% of the results of MAB
Broker Services PTY Limited by virtue of its 45% equity stake, 35%
of the results of Freedom 365 Mortgage Solutions Limited by virtue
of its 35% equity stake, 25% of the results of Buildstore Limited
and Clear Mortgage Solutions Limited by virtue of its 25% equity
stakes and 20% of the results of Vita Financial Limited by virtue
of its 20% equity stake.
On 11 January 2016 a new holding company, Sort Group Limited,
was put in place such that Mortgage Advice Bureau Limited now owns
33.25% of Sort Group Limited and Sort Group Limited in turn owns
69.18% of Sort Limited and also 69.18% of Sort Technology Limited.
Mortgage Advice Bureau Limited's effective holding in Sort Limited
did not change as a result of this and remains at 23%. Mortgage
Advice Bureau Limited also has an effective holding of 23% in Sort
Technology Limited. The Group is entitled to 33.25% of the results
of Sort Group Limited by virtue of its 33.25% equity stake.
Acquisitions and disposals during the year
The Group acquired a 25% interest in Clear Mortgage Solutions
Limited on 18 March 2016 at a cost of GBP50,000 plus contingent
consideration of up to GBP50,000 payable in 2017 depending on the
audited results of Clear Mortgage Solutions Limited for the
financial year ended 31 December 2016. The full GBP50,000
contingent consideration has been provided for in these financial
statements. Also during the year the Group acquired a 20% interest
in Vita Financial Limited on 30 June 2016 at a cost of GBP150,000,
a 35% interest in Freedom 365 Mortgage Solutions Limited on 22
September 2016 at a cost of GBP350 and a 45% interest in MAB Broker
Services PTY Limited on 9 December 2016 at a cost of GBP2,666
(AUD4,500).
On 31 July 2016, the Group disposed of its 49% holding in
Capital Private Finance Limited for sale proceeds of GBP2.7m which
resulted in a net profit on sale of GBP2.69m.
Notes to the consolidated financial statements
for the year ended 31 December 2016 (continued)
13 Investments (continued)
Investment in Associates (continued)
As the associates are private companies published share prices
are not available. The aggregate amounts of certain financial
information of the associates is summarised as follows:
Pinnacle
Surveyors
(England Sort
& Wales) Buildstore Group 2016
Limited Limited Limited Others Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- ----------- ------------- ---------- ---------- ----------
Non-current assets 38 100 808 146 1,092
Cash balances 378 316 631 412 1,737
Current assets 572 247 80 266 1,165
Current liabilities (592) (587) (257) (800) (2,236)
Non-current liabilities
and provisions (2) (10) (2) (142) (156)
Revenue 3,723 3,271 3,921 2,641 13,556
Profit before taxation 1,020 176 455 148 1,799
Total comprehensive
income 816 134 337 25 1,312
Profit attributable
to Group 400 - 41 170 611
------------------------- ----------- ------------- ---------- ---------- ----------
Dividends received
from associates 357 - - 210 567
------------------------- ----------- ------------- ---------- ---------- ----------
Pinnacle
Surveyors Capital
(England Private
& Wales) Finance 2015
Limited Limited Others Total
GBP'000 GBP'000 GBP'000 GBP'000
------------------------- ----------- ------------- ---------- ---------- ----------
Non-current assets 12 3 228 243
Cash balances 270 479 739 1,488
Current assets 532 68 321 921
Current liabilities (497) (257) (760) (1,514)
Non-current liabilities
and provisions (2) (87) (200) (289)
Revenue 2,978 1,983 5,734 10,695
Profit before taxation 765 897 726 2,388
Total comprehensive
income 607 715 617 1,939
Profit attributable
to Group 298 350 55 703
------------------------- ----------- ------------- ---------- ---------- ----------
Dividends received
from associates 257* 329 - 586
------------------------- ----------- ------------- ---------- ---------- ------------
Notes to the consolidated financial statements
for the year ended 31 December 2016 (continued)
13 Investments (continued)
Investment in Associates (continued)
The details of Capital Private Finance Limited for the period up
to the date of disposal were as follows:
GBP'000
------------------------- ----------
Non-current assets 2
Cash balances 394
Current assets 110
Current liabilities (292)
Non-current liabilities
and provisions (79)
Revenue 664
Profit before taxation 289
Total comprehensive
income 231
Profit attributable
to Group 118
----------------------------- ----------
Dividends received
from associates 210
----------------------------- ----------
The amounts disclosed for revenue, profit before tax, total
comprehensive income, profit attributable to Group and dividends
received are included in the amounts disclosed in the figures for
"Others" in the table for 2016 as set out above. The balance sheet
details are not included in the table above.
All associates prepare their financial statements in accordance
with FRS 102 other than Clear Mortgage Solutions Limited who
prepare their financial statements in accordance with UK GAAP and
MAB Broker Services PTY Limited who prepare their financial
statements in accordance with the Australian Accounting Standards.
There would be no material difference to the accounts of any of the
associates other than Sort Group Limited if these were prepared in
accordance with IFRS. For Sort Group Limited amortisation of
GBP86,981 has been charged for the year on goodwill arising on
consolidation, no amortisation would be charged under IFRS.
* These dividends are received from CO2 Commercial Limited, the
parent undertaking of Pinnacle Surveyors (England & Wales)
Limited. All other information disclosed above relates to Pinnacle
Surveyors (England & Wales) Limited.
Other investments
Unlisted investment
The unlisted investment represents a 0.05% shareholding in
Twenty7tec Limited, a company that licenses certain mortgage
sourcing software. The net book value of the investment at 31
December 2016 was GBP150 (2015: GBP150).
Notes to the consolidated financial statements
for the year ended 31 December 2016 (continued)
14 Subsidiaries
The subsidiaries of Mortgage Advice Bureau (Holdings) Plc at the
reporting date have been included in the consolidated financial
statements. The subsidiaries are as follows:
Country Percentage
Company name of Incorporation of ordinary Nature of
shares business
held
---------------------------- ------------------ ------------- -----------------
Provision
Mortgage Advice England 100 of financial
Bureau Limited and Wales services
Mortgage Advice Provision
Bureau (Derby) of financial
Limited England 100 services
and Wales
Provision
England 100 of financial
Capital Protect and Wales services
Limited
Provision
Mortgage Talk England 100 of financial
Limited and Wales services
Intermediate
Talk Limited England 100 holding company
and Wales
Mortgage Advice Intermediate
Bureau Australia Australia 100 holding company
(Holdings) PTY
Limited
Mortgage Advice Holding
Bureau PTY Limited Australia 100 of intellectual
property
MABWM Limited England 100 Dormant
and Wales
Mortgage Advice
Bureau (UK) Limited England 100 Dormant
and Wales
MAB (Derby) Limited England 100 Dormant
and Wales
L&P 137 Limited England 100 Dormant
and Wales
Mortgage Talk (Partnership)
Limited England 100 Dormant
and Wales
Financial Talk England 100 Dormant
Limited and Wales
Survey Talk Limited England 100 Dormant
and Wales
L&P 134 Limited England 100 Dormant
and Wales
Loan Talk Limited England 100 Dormant
and Wales
---------------------------- ------------------ ------------- -----------------
Acquisitions
On 8 December 2016 the Group acquired a 100% interest in
Mortgage Advice Bureau Australia (Holdings) PTY Limited which was a
newly incorporated entity. Mortgage Advice Bureau Australia
(Holdings) PTY Limited has a 100% equity stake in Mortgage Advice
Bureau PTY Limited and also a 45% equity stake in MAB Broker
Services PTY Limited.
Notes to the consolidated financial statements
for the year ended 31 December 2016 (continued)
14 Subsidiaries (continued)
Mortgage Advice Bureau (Holdings) Plc holds 100% of the ordinary
share capital of Mortgage Advice Bureau Limited and Talk
Limited.
Mortgage Advice Bureau Limited holds 100% of the ordinary share
capital of Mortgage Advice Bureau (Derby) Limited, Capital Protect
Limited, MABWM Limited and Mortgage Advice Bureau Australia
(Holdings) PTY Limited.
Talk Limited holds 100% of the ordinary share capital of
Mortgage Talk Limited, L&P 137 Limited, Mortgage Talk
(Partnership) Limited, Financial Talk Limited and Survey Talk
Limited.
Mortgage Talk Limited holds 100% of the ordinary share capital
of Loan Talk Limited.
Mortgage Advice Bureau Australia (Holdings) PTY Limited holds
100% of the ordinary share capital of Mortgage Advice Bureau PTY
Limited.
L&P 137 Limited holds 100% of the ordinary share capital of
L&P 134 Limited.
There are no restrictions regarding the utilisation of cash or
other resources held by any subsidiary.
15 Trade and Other Receivables
2016 2015
GBP'000 GBP'000
-------------------------------- -------- --------
Trade receivables not past
due 757 564
Trade receivables past due
but not impaired 55 49
Trade receivables past due
but impaired 481 459
-------------------------------- -------- --------
Trade receivables 1,293 1,072
Less provision for impairment
of trade receivables (481) (459)
-------------------------------- -------- --------
Trade receivables - net 812 613
Amounts due from associates 318 116
Prepayments and accrued income 2,126 2,123
-------------------------------- -------- --------
3,256 2,852
-------------------------------- -------- --------
Trade and other receivables are all current and the book value
is the same as their fair value. Trade receivables are reviewed for
impairment if they are past due and are not repaid within the terms
of the contracts.
Trade receivables include advances granted to Appointed
Representatives, which have contractual repayment terms. These
advances are considered to be past due when there is a delinquency
in interest or principal payments.
Also included in trade receivables are amounts due from
Appointed Representatives relating to commissions that are
refundable to the Group when policy lapses or other reclaims exceed
new business. As these balances have no credit terms, the Board of
Directors consider these to be past due if they are not received
within seven days. In the management of these balances, the
Directors can recover them from subsequent new business entered
into with the Appointed Representative or utilise payables that are
owed to the same counterparties and included within payables as the
Group has the legally enforceable right of set off in such
circumstances. These payables are considered sufficient by the
Directors to recover receivable balances should they default, and,
accordingly, credit risk in this respect is minimal.
Notes to the consolidated financial statements
for the year ended 31 December 2016 (continued)
15 Trade and Other Receivables (continued)
In light of the above, the Directors do not consider that
disclosure of an aging analysis of past due but not impaired
receivables would provide useful additional information. The Group
has not recognised a provision for impairment of these balances
because there is no objective evidence that they are impaired.
Further information on the credit quality of financial assets is
set out in note 18.
A summary of the movement in the provision for the impairment of
receivables is as follows:
2016 2015
GBP'000 GBP'000
--------------------------------- -------- --------
At 1 January 459 441
Impairment losses recognised 25 20
Impairment provisions no longer
required (3) (2)
--------------------------------- -------- --------
At 31 December 481 459
--------------------------------- -------- --------
The maximum exposure to credit risk at the reporting date is the
carrying value of each class of receivables mentioned above less
collateral held as security. Details of security held are given in
note 18.
No other balances are past due or impaired.
16 Cash and cash equivalents
2016 2015
GBP'000 GBP'000
--------------------------------- --------- ---------
Unrestricted cash and bank
balances 10,811 8,189
Bank balances held in relation
to retained commissions 7,900 5,767
--------------------------------- --------- ---------
Cash and cash equivalents 18,711 13,956
--------------------------------- --------- ---------
Bank balances held in relation to retained commissions earned on
an indemnity basis in relation to life policies are held to cover
potential future lapses in Appointed Representatives commissions.
Operationally the Group does not treat these balances as available
funds. An equal and opposite liability is shown within Trade
Payables (note 17).
Notes to the consolidated financial statements
for the year ended 31 December 2016 (continued)
17 Trade and Other Payables
2016 2015
GBP'000 GBP'000
------------------------------------- --------- ---------
Appointed Representatives retained
commission 7,900 5,767
Other trade payables 2,655 2,224
------------------------------------- --------- ---------
Trade payables 10,555 7,991
Social security and other taxes 240 242
Other payables 20 53
Accruals 1,590 1,233
------------------------------------- --------- ---------
12,405 9,519
------------------------------------- --------- ---------
Should a life policy be cancelled within four years of
inception, a proportion of the original commission will be clawed
back by the insurance provider. The majority of any such repayment
is payable by the Appointed Representative. It is the Group's
policy to retain a proportion of commission payable to the
Appointed Representative to cover such potential future lapses;
these sums remain a liability of the Group. This commission is held
in a separate ring fenced bank account as described in note 16.
As at 31 December 2016 and 31 December 2015, the book value of
trade and other payables approximates their fair value given that
they are short term in nature.
Appointed Representatives retained commission is expected to be
payable after more than one year. Other trade payables normally
fall due within 30 to 60 days.
Notes to the consolidated financial statements
for the year ended 31 December 2016 (continued)
18 Financial Instruments - risk management
The Group is exposed through its operations to the following
financial risks:
-- Credit risk
-- Liquidity risk
-- Interest rate risk
In common with all other businesses, the Group is exposed to
risks that arise from its use of financial instruments. This note
describes the Group's objectives, policies and processes for
managing those risks and the methods used to measure them. Further
quantitative information in respect of these risks is presented
throughout these financial statements.
Principal financial instruments
The principal financial instruments used by the Group, from which financial instrument
risk arises, are
as follows
* Trade and other receivables
* Cash and cash equivalents
* Trade and other payables
The Group does not issue or use financial instruments of a
speculative nature. A summary of financial instruments held by
category is provided below:
Financial assets 2016 2015
GBP'000 GBP'000
----------------------------- -------- --------
Cash and cash equivalents 18,711 13,956
Trade and other receivables 1,130 729
Total financial assets 19,841 14,685
----------------------------- -------- --------
Financial liabilities 2016 2015
GBP'000 GBP'000
----------------------------- -------- --------
Trade and other payables 12,405 9,519
Total financial liabilities 12,405 9,519
----------------------------- -------- --------
Notes to the consolidated financial statements
for the year ended 31 December 2016 (continued)
18 Financial Instruments - risk management (continued)
General objectives, policies and processes
The Board has overall responsibility for the determination of
the Group's risk management objectives and policies and designs and
operates processes that ensure the effective implementation of the
objectives and policies to the Group's finance function. The Board
sets guidelines to the finance team and monitors adherence to its
guidelines on a monthly basis.
The overall objective of the Board is to set policies that seek
to reduce risk as far as possible without unduly affecting the
Group's competitiveness and flexibility. Further details regarding
these policies are set out below.
Credit risk
Credit risk is the risk of financial loss to the Group if a
trading partner or counterparty to a financial instrument fails to
meet its contractual obligations. The Group is mainly exposed to
credit risk from loans to its trading partners. It is Group policy
to assess the credit risk of trading partners before advancing
loans or other credit facilities. Assessment of credit risk
utilises external credit rating agencies. Personal guarantees are
generally obtained from the directors of its trading partners.
Quantitative disclosures of the credit risk exposure in relation
to financial assets are set out below. Further disclosures
regarding trade and other receivables are given in note 15.
Financial assets - maximum 2016 2015
exposure
GBP'000 GBP'000
----------------------------- -------- --------
Cash and cash equivalents 18,711 13,956
Trade and other receivables 1,130 729
----------------------------- -------- --------
Total financial assets 19,841 14,685
----------------------------- -------- --------
The carrying amounts stated above represent the Group's maximum
exposure to credit risk for trade and other receivables. An element
of this risk is mitigated by collateral held by the Group for
amounts due to them.
Trade receivables consist of a large number of unrelated trading
partners and therefore credit risk is limited. Due to the large
volume of trading partners the Group does not consider that there
is any significant credit risk as a result of the impact of
external market factors on their trading partners. Additionally,
within trade payables are amounts due to the same trading partners
that are included in trade receivables; this collateral of
GBP509,169 (2015: GBP398,480) significantly reduces the credit
risk.
The Group's credit risk on cash and cash equivalents is limited
because the Group places funds on deposit with several UK banks all
of whom are A or BBB+ rated where applicable.
Notes to the consolidated financial statements
for the year ended 31 December 2016 (continued)
18 Financial Instruments - risk management (continued)
Credit risk (continued)
Interest rate risks
The Group's interest rate risk arises from cash on deposit. The
Group aims to maximise its return on cash on deposit whilst
ensuring that cash is available to meet liabilities as they fall
due. Current market deposit interest rates are minimal and
therefore any fall in these rates is unlikely to have a significant
impact on the results of the Group.
Foreign exchange risk
As the Group does not operate outside of the United Kingdom and
has only one investment outside the UK, it is not exposed to any
material foreign exchange risk.
Liquidity risk
Liquidity risk arises from the Group's management of working
capital and finance charges. It is the risk that the Group will
encounter difficulty in meeting its financial obligations as they
fall due.
The Group's policy is to ensure that it will always have
sufficient cash to allow it to meet its liabilities when they
become due. The Group's trade and other payables are repayable
within one year from the reporting date.
The Board receives annual 12 -month cash flow projections based
on working capital modelling as well as information regarding cash
balances monthly. At the end of the financial year, these
projections indicated that the Group expected to have sufficient
liquid resources to meet its obligations under all reasonably
expected circumstances. Additionally the Group has financial
resource requirements set by its regulator, the Financial Conduct
Authority. The Board has set a policy to ensure that adequate
capital is maintained to ensure that these externally set financial
resource requirements are exceeded at all times. Quarterly reports
are made to the Financial Conduct Authority and submission is
authorised by the Finance Director, at which time capital adequacy
is re-assessed.
Capital management
The Group monitors its capital which consists of all components
of equity (i.e. share capital, share premium, capital redemption
reserve, share option reserve and retained earnings).
The Group's objectives when maintaining capital are
-- To safeguard the entity's ability to continue as a going
concern, so that it can continue to provide returns for
shareholders and benefits for other stakeholders.
-- To ensure that capital is maintained at all times to ensure
that financial resource requirements set by its regulator, the
Financial Conduct Authority, are exceeded at all times.
-- To ensure the Group has the cash available to develop the
services provided by the Group to provide an adequate return to
shareholders.
Notes to the consolidated financial statements
for the year ended 31 December 2016 (continued)
19 Provisions
Clawback provision 2016 2015
GBP'000 GBP'000
----------------------------- --------- ---------
At 1 January 918 751
Charged to the statement of
comprehensive income 301 167
----------------------------- --------- ---------
At 31 December 1,219 918
----------------------------- --------- ---------
The provision relates to the estimated cost of repaying
commission income received upfront on life assurance policies that
may lapse in the four years following issue. Provisions are held in
the financial statements of two of the group's subsidiaries:
Mortgage Advice Bureau Limited and Mortgage Advice Bureau (Derby)
Limited. The exact timing of any clawbacks is uncertain and the
provision was based on the Directors' best estimate, using industry
data where available, of the probability of clawbacks to be
made.
20 Deferred Tax
Deferred tax is calculated in full on temporary differences
using a tax rate of 17% (2015: 18%). The reduction in the main rate
of corporation tax as set out in note 8 has been applied to
deferred tax balances which are expected to reverse in the
future.
The movement in deferred tax is shown below:
2016 2015
GBP'000 GBP'000
-------------------------------- --------- ---------
Deferred tax liability
- opening balance (28) (25)
Recognised in the statement
of comprehensive income 60 (3)
-------------------------------- --------- ---------
Deferred tax asset/(liability)
- closing balance 32 (28)
-------------------------------- --------- ---------
The deferred tax balance is made up as follows:
2016 2015
GBP'000 GBP'000
Accelerated capital allowances (40) (28)
Share-based payment 72 -
-------------------------------------- --------- ---------
Net deferred tax asset/(liabilities) 32 (28)
-------------------------------------- --------- ---------
Reflected in the statement 2016 2015
of financial position as GBP'000 GBP'000
follows:
Deferred tax liability (40) (28)
Deferred tax asset 72 -
---------------------------------- --------- ---------
Deferred tax asset/(liabilities)
net 32 (28)
---------------------------------- --------- ---------
Deferred tax liabilities have arisen due to capital allowances
which have been received ahead of the depreciation charged in the
accounts.
Notes to the consolidated financial statements
for the year ended 31 December 2016 (continued)
21 Share Capital
Issued and fully paid 2016 2015
GBP'000 GBP'000
--------------------------- --------- ---------
Ordinary shares of 0.1p
each 51 51
--------------------------- --------- ---------
Total share capital 51 51
--------------------------- --------- ---------
22 Reserves
The Group's policy is to maintain an appropriate capital base
and comply with its externally imposed capital requirements whilst
providing maximum shareholder value.
The following describes the nature and purpose of each reserve
within equity:
Reserve Description and purpose
Share premium Amount subscribed for share
capital in excess of nominal
value.
Capital redemption The capital redemption reserve
reserve represents the cancellation
of part of the original share
capital premium of the company
at par value of any shares
Share option repurchased.
reserve
The fair value of equity instruments
granted by the Company in
respect of share based payment
transactions.
Retained earnings All other net gains and losses
and transactions with owners
(e.g. dividends) not recognised
elsewhere.
There is no restriction on the distribution of retained
earnings.
23 Retirement Benefits
The Group operates a defined contribution pension scheme for the
benefit of its employees and also makes contributions to a
self-invested personal pension ("SIPP"). The assets of the scheme
and the SIPP are held separately from those of the Group in
independently administered funds. The pension cost charge
represents contributions payable by the Group to the SIPP and
amounted to GBP149,400 (2015: GBP112,658). There were no
contributions payable to the fund or the SIPP at the statement of
financial position date (2015: GBP20,023, included in other
payables).
Notes to the consolidated financial statements
for the year ended 31 December 2016 (continued)
24 Related Party Transactions
At 31 December 2015 there was a loan outstanding from Pinnacle
Surveyors (England & Wales) Limited a subsidiary of an
associated company, of GBP16,000 included in trade and other
receivables. The loan was repaid in full during the year ended 31
December 2016.
At 31 December 2016 there was a loan outstanding from Buildstore
Limited, an associated company, of GBP65,000 (2015: GBP100,000)
included in trade and other receivables. During the year the Group
paid commissions of GBP1,499,513 (2015: GBP1,364,453) to Buildstore
Limited.
During the year the Group received introducer commission from
MAB Wealth Management Limited, an associated company of GBP9,345
(2015: GBP6,147). There is no balance outstanding with MAB Wealth
Management Limited at 31 December 2016 (2015: GBPnil).
During the year the Group received introducer commission from
Sort Limited, a subsidiary of an associated company of GBP181,105
(2015: GBP12,758). A loan of GBP5,195 was made to Sort Group
Limited, an associated company during the year but this was repaid
by 31 December 2016. There is no balance outstanding with Sort
Group Limited at 31 December 2016 (2015: GBPnil).
During the year the Group paid commission to Clear Mortgage
Solutions Limited, an associated company of GBP877,217.
During the year the Group paid commission to Freedom 365
Mortgage Solutions Limited, an associated company of GBP5,400. At
31 December 2016 there was a loan outstanding from Freedom 365
Mortgage Solutions Limited of GBP105,000 included in trade and
other receivables.
During the year the Group paid commission to Vita Financial
Limited, an associated company of GBP208,445.
At 31 December 2016 there was a loan outstanding from MAB Broker
Services PTY Limited, an associated company of GBP148,138
(AUD250,000) included in trade and other receivables.
The Group's related party transactions in the year include the
remuneration of the directors' emoluments, pension entitlements and
share-based payments disclosed in note 6 of the financial
statements.
During the year the Group received dividends from associated
companies as follow:
2016 2015
GBP'000 GBP'000
--------------------------------- --------- ---------
CO2 Commercial Limited 357 257
Capital Private Finance Limited 210 329
--------------------------------- --------- ---------
Total 567 586
--------------------------------- --------- ---------
Capital Private Finance Limited was sold on 31 July 2016 and
ceased to be an associated company from that date.
Notes to the consolidated financial statements
for the year ended 31 December 2016 (continued)
25 Ultimate Controlling Party
There is no ultimate controlling party.
26 Share based payments
Mortgage Advice Bureau Executive Share Option Plan
The Group operates two equity-settled share based remuneration
schemes for Executive Directors and certain senior management, one
being an approved scheme, the other unapproved, but with similar
terms. Half of the options are subject to a total shareholder
return (TSR) performance condition and the remaining half are
subject to an earnings per share (EPS) performance condition. The
options in both schemes vest as follows:
For options outstanding at 1 January 2016:
-- 25% based on performance to 31 March 2017, exercisable between that date and 11 November 2022,
-- 25% based on performance to 31 March 2018, exercisable between that date and 11 November 2022,
-- 25% based on performance to 31 March 2018, exercisable
between 31 March 2019 and 11 November 2022,
-- 25% based on performance to 31 March 2018, exercisable
between 31 March 2020 and 11 November 2022,
For options granted during the year:
-- 100% based on performance to 31 March 2019, exercisable between that date and 3 May 2024
The number and weighted average exercise prices (WAEP) of, and
movements in, share options during the year for the Mortgage Advice
Bureau Executive Share Option Plan:
2016 2016 2015 2015
WAEP Number WAEP Number
GBP GBP
---------------- ------ ------------------ ------ ----------
Outstanding at
1 January 1.63 1,400,342 1.60 1,325,000
Granted during
the year 3.58 771,480 2.19 75,342
---------------- ------ ------------------ ------ ----------
Outstanding at
31 December 2.32 2,171,822 1.63 1,400,342
---------------- ------ ------------------ ------ ----------
Notes to the consolidated financial statements
for the year ended 31 December 2016 (continued)
26 Share based payments (continued)
On 4 May 2016, 771,480 options over ordinary shares of 0.1 pence
each in the Company were granted to the Executive Directors and
senior executives under the Mortgage Advice Bureau Executive Share
Option Plan. The exercise price of the options of 357.75p is equal
to the average of the last three business days' closing price for
the ordinary shares of the Company at the date of grant. The
options are subject to the achievement of performance conditions
based on total shareholder return and earnings per share
criteria.
For the share options outstanding under the Mortgage Advice
Bureau Executive Share Option Plan as at 31 December 2016, the
weighted average remaining contractual life is 1.96 years (2015:
2.75 years).
The following information is relevant in the determination of
the fair value of options granted during the year under the
equity-settled share based remuneration scheme operated by the
Group.
2016 2015
---------------------------- -------------- --------------
Equity-settled
Option pricing model - EPS Black-Scholes Black-Scholes
Option pricing model - TSR Stochastic Stochastic
Exercise price GBP3.5775 GBP2.19
Expected volatility 30% 30%
Expected dividend yield 4.0% 7.2%
Risk free interest rate 0.47% 0.6% - 1.29%
---------------------------- -------------- --------------
Expected volatility is a measure of an amount by which the share
price is expected to fluctuate during a period. As the Company only
listed in November 2014 there is insufficient historical data. We
have therefore used a proxy volatility figure based on the median
volatilities of dividend paying FTSE AIM 100 companies over each of
the expected terms.
Dividends paid on shares reduce the fair value of an award as a
participant does not receive the dividend income on these shares.
For the share options granted during the year the historic dividend
yield has been used, calculated as dividends announced in the 12
months prior to grant calculated as a percentage of the share price
on the date of grant to give a dividend yield of 4.0%.
The Options offer participants the opportunity to benefit from
increasing per share value without risking the current per share
price. The risk-free rate used is the rate of interest obtainable
from UK government securities as at the date of grant over the
expected terms
The options granted this year have vesting periods of 3.0 years
from the date of grant and the calculation of the share based
payment is based on these vesting periods.
Notes to the consolidated financial statements
for the year ended 31 December 2016 (continued)
26 Share based payments (continued)
MAB AR Option Plan
The Group operates an equity-settled share plan, the AR Option
Plan, to reward selected ARs of the Group. The AR Option Plan
provides for options which have a nominal exercise price of price
of 0.01 pence per Share (or, for any individual AR, not less than
GBP1 on each occasion of exercise) to acquire Ordinary Shares
subject to performance conditions. Certain criteria must be met in
order for ARs to be eligible, including using the Mortgage Advice
Bureau brand and being party to an AR Agreement which provides for
an initial contract term of at least five years at the date of
grant. The AR Options will normally become exercisable following
the fifth anniversary of grant subject to the satisfaction of
performance conditions based on financial and other targets,
including quality of consumer outcomes, compliance standards and
continued use of the Mortgage Advice Bureau brand.
The number and weighted average exercise prices (WAEP) of, and
movements in, share options during the year for the MAB AR Option
Plan:
2016 2016 2015 2015
WAEP Number WAEP Number
---------------- ------ -------- ------ --------
Outstanding at
1 January 0.01p 255,000 - -
Granted during
the year - 0.01p 255,000
---------------- ------ -------- ------ --------
Outstanding at
31 December 0.01p 255,000 0.01p 255,000
---------------- ------ -------- ------ --------
For the share options outstanding under the MAB AR Option Plan
as at 31 December 2016, the weighted average remaining contractual
life is 3.4 years (2015: 4.4 years).
The following information is relevant in the determination of
the fair value of options granted during the year under the
equity-settled share based MAB AR Option Plan operated by the
Group.
2016 2015
------------------------- ------ --------------
Equity-settled
Option pricing model - Black-Scholes
Exercise price - 0.01p
Expected volatility - 30%
Expected dividend yield - 7.1%
Risk free interest rate - 1.33%
------------------------- ------ --------------
Notes to the consolidated financial statements
for the year ended 31 December 2016 (continued)
26 Share based payments (continued)
Expected volatility is a measure of an amount by which the share
price is expected to fluctuate during a period. As the Company only
listed in November 2014 there is insufficient historical data. We
have therefore used a proxy volatility figure based on the medium
volatilities, of dividend paying FTSE AIM 100 companies over each
of the expected terms.
Dividends paid on shares reduce the fair value of an award as a
participant does not receive the dividend income on these shares.
For the share options granted during 2015 the stub dividend in
respect of the period from Admission to 31 December 2014 has been
annualised and divided at the share price at date of grant to give
a dividend yield of 7.1%.
The options offer participants the opportunity to benefit from
increasing per share value without risking the current per share
price. The risk-free rate used is the rate of interest obtainable
from UK government securities as at the date of the grant over the
expected terms.
The options granted in 2015 have a vesting period of 5 years
from the date of grant and calculation of the share-based payment
is based on these vesting periods.
Share-based remuneration expense
The share-based remuneration expense of GBP315,223 (2015:
GBP250,167) includes the charge for the equity-settled schemes of
GBP221,717 (2015: GBP146,717) and the matching element of the
Group's Share Incentive Plan for all employees of GBP52,506 (2015:
GBP47,312).
The Group did not enter into any share-based payment
transactions with parties other than employees or it's Appointed
Representatives during the current or previous period.
27 Contingent Liabilities
The group had no contingent liabilities at 31 December 2016 or
31 December 2015.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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